Why Cutting Costs Won’t Always Boost Profits

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samantha-eck_2_02-20-2025_120206: Welcome to the Creative Minds Smart

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Money Podcast, where we turn financial confusion into creative confidence.

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I'm Samantha Eck, bookkeeper and fractional CFO for creative entrepreneurs.

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Each week I'm sharing my financial expertise and actionable

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strategies to help you build a thriving creative business.

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Plus, you'll hear from industry experts who bring fresh perspectives on growing

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your business beyond the numbers.

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Because building a successful creative business starts with

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strong financial foundations.

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Your next chapter starts now.

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You are listening to the Creative Minds Smart Money Podcast.

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And today, of course, as always, I'm so excited to talk about all the things.

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I've been talking a lot lately about on threads, about how I just struggle

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so hard with getting things out into words and which is why I love my podcast

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because my podcast is literally the place where I can come and just like talk.

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I have an outline for the episode.

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I have a vision for the episode, and I just talk and I guess it not

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really makes sense, but it all just flows really well because I already

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know what I wanna talk about.

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Whereas with my, emails and all of my writing and things like

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that, it always seems super hard for me to get the point across.

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So if you're here, thank you for listening and know that I'm always

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here to provide value and education, but I also wanna help you out as a

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bookkeeper, as a professional CFO, I want you to understand your numbers.

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And I've said this before, but I want you to beat statistics.

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So today we're gonna talk about why penny pinching, or cutting costs

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isn't always a way to boost profits.

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Now, we've talked a lot about in the past about things we need to cut, like

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subscription costs or when we're in a recession, you need to cut things.

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But I wanna focus on the opposite side of this, and talk about why

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cutting things isn't necessarily the best business strategy especially if

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things are already working for you.

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It's so important to really talk about this because I think that there are

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too many times when we assume that.

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If we are running our businesses and things are getting tight, the

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only thing to do is cut everything.

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And by cutting everything, I literally mean cutting everything, which just, it's

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not the best strategy and it's not really a strategy period, because if you're going

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to cut everything, you're gonna take back time that you might have already gained.

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When your expenses creep up and you're looking at your profit and loss and

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you panic, and your first instinct is to cancel everything, whether that's a

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bookkeeper, a virtual assistant, your social media manager, something like that.

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Because what we've been taught.

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As a society and as individuals is that the solution when things get tight

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is to cut back, which is realistic, especially in like a personal sense.

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But when you're thinking of a business mindset and we're thinking of that from

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a business sense, it's a lot tougher to cut back because when we cut back, it's

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what keeps us small, because as business owners we only have so much capacity,

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and in reality we are the bottleneck.

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For example, I own, I run my business, and I understand that because I'm

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the only person in my business, I am the bottleneck to everything.

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If someone needs to speak with me, if they need financials, if

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they need to ask me questions.

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I'm the bottleneck, but if I had support or help in certain areas,

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that bottleneck is eliminated.

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So that is why I'm saying by cutting, it keeps you small.

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So let's really dig into this topic and talk about it and how we wanna shift

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from being defensive about our finances to being more offensive and really

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focusing on what's going to drive our business forward, not drive it backwards.

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When we really, really think about where.

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The fear or the feeling of penny pension comes from, or the feeling

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of cutting costs comes from.

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There's really three important things that we wanna think about when we think of,

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okay, where am I focusing on cost for?

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Obviously, the first one is fear.

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So you're scared.

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You are scared that you're gonna run out of money.

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You are scared that you're not gonna be able to provide for your family.

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You're scared that your business is gonna go over.

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Under.

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It's all rooted in emotion.

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The other one is shame.

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You know, you are ashamed that you can't afford something or someone you're

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ashamed that something's happening.

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Now, I don't want this to be a thing where you're like, okay, Samantha, so

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you're telling me , I should just keep everything, even if I can't afford it.

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That's not what I'm saying.

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I'm saying I want you to think critically when you are in a, emotional state

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of fear or shame or even survival mode where you're like, I need to

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cut costs in order to save money.

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And I want you to think critically and really analyze where you cut costs.

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Because if you've gained, I dunno, let's say five hours back in time from

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handing off your bookkeeping and it saved you over $3,000 because you've

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managed to cut subscriptions you didn't need, or something like that.

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The question then you wanna ask yourself is, will cutting my

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bookkeeper help me or is it going to actually hurt me in my business?

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When we cut things, it feels really productive 'cause we're like, Hey,

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I have more money in my pocket.

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This is fantastic.

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But what happens is it often creates this false sense of control because now

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you know you've cut that bookkeeper, now you have the bookkeeping back

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into your lap and it's back there, and now you have to deal with that.

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So there's just so many common traps that we find when we end up penny pinching,

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like cutting, coaching, slashing tools.

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Avoiding hiring, and just DIYing because you don't want someone to take over

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for you or something else is happening.

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You can be frugal, but I will just say this part, like straight up.

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You can't frugal your way into financial freedom.

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There is a strategic way to get there, and then there's a really,

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really tight way to get there.

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Now, I, that's not me saying don't hire people or cut everything.

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Again, I wanna make sure that we're just being really

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intentional, like you guys know.

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I'm very intentional about that.

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So when we talk about cutting costs.

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It doesn't necessarily, again, mean that it's going to bring you more

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revenue or bring you more profit, because cutting costs is not always

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the way to bring you more profit.

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Again, if you had a bookkeeper and they save you five hours a month,

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that's five hours that you could be spending on sales generating activities.

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So when you think of cutting things or you think of letting go of people,

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you really want to be critical of what you're letting go and why

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. When you cut costs, like what does it actually cost you?

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You're probably looking at me and being like, okay, so what Samantha?

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I cut my bookkeeper, I cut my coach.

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What is it gonna cost me?

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Well, there's a few things and it really helps emotionally like.

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Especially, you're gonna have that lost momentum.

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Imagine you have a coach who just fires you up and burns you up inside.

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It's like, yeah, this coach is amazing.

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I love this person.

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They just get me going and you're like, you know what?

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My costs are too tight.

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I have to cut them.

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It's a loss of momentum because now you just you don't have them anymore.

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You don't have that same support.

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You don't have that same backing.

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And now when you make decisions, you have no one you can go to.

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It also gives you a sense of decision fatigue because when you're really

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thinking about what costs to cut and you know, you're having to decide

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between all these different things, it's gonna just give you that like

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fatigue and it's gonna take and zap that excitement out of your business.

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And similar to that, along that same vein is burnout.

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Because if you're just cutting everything and you are putting everything back

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onto your plate, you're gonna burn out.

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Now, I know that everybody loves to live the solopreneur life,

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they love to be a solopreneur.

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And there's nothing wrong with being a solopreneur.

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However, a solopreneur does not necessarily mean that nobody is

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ever involved in your business.

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Human beings are really good at certain things, and even as business owners,

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our zone of genius is certain things.

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So if you're a website designer, your zone of genius is designing websites.

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Now, if your zone of genius is also numbers, fantastic.

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But that's what kind of what I'm talking about.

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If you're focusing on numbers and you absolutely hate them, and you handed it

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off to your bookkeeper, and now you take it back, you're going to burn yourself

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out because that was something that you passed off and you just couldn't handle.

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Now again, I want.

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I just wanna make this clear.

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It's not if you are in desperate need of money and you need money to support your

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family, I'm not saying don't cut things.

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This is more of that occasion when you have money, you are able to

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provide for your family, but you are looking at your business and you're

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like, I want more in my pocket.

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Which isn't necessarily always a good, like it is a good thing, but

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the way to getting more in your pocket is not necessarily cutting costs.

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It could just be adding revenue, if that makes sense.

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We always think of, cutting when we have a scarcity mindset.

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Again, that's where I'm talking about this is comes from that scarcity

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mindset where we're cutting because we just wanna see more internet

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income right now right at this moment.

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We wanna see that percentage.

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Sometimes it takes a while to build up to that net income.

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And by cutting things and cutting from scarcity, you play into this

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cycle of being small because you're like, okay, I just wanna see my

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bottom line grow bigger right now.

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But businesses don't grow their bottom line overnight.

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Their bottom line takes a lot of time and a lot of people, and a lot

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of help and a lot of assistance.

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So again, that's gonna show up not just in your business, but

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in your books, because it's gonna cause some sort of delayed growth.

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You're gonna have stagnant revenue because you know you're focusing now just on the

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parts of your business that you were not focusing on now, and then of course it's

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gonna cause that unpredictable cash flow.

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'cause you do have that stagnant revenue.

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So now you're, telling me, okay Samantha, so you've gone on and on about

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cutting costs, but what works instead?

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Like, what can I do instead of cutting costs that will help my business?

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So first of all, the key here is going on the offense with your numbers.

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And that sounds like a, a sports term I know.

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But let me go a little bit deeper.

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The first thing is understanding what's actually profitable in your business.

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So when I'm saying that, what I'm saying is if you are looking

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at your business and you have.

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Let's just throw out a number, 50 different offers.

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As a service provider, you have 50 different offers.

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25 of them are digital, 15 of them are group, 10 of them are one-to-one programs.

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Whatever that is.

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Maybe you have just like this massive business, what of those

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offers is actually profitable?

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And if you're looking and you're saying, okay, only 10 of these offers

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are actually profitable, like only five of these group offers two of these,

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one-to-one offers, and three of these digital products are actually profitable.

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First of all, the first thing you need to do is cut all of the other offers.

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Like, don't focus on the non-profitable offers and focus on the profitable offers.

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What about them works?

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What about them is bringing you in money and how can you make more?

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I. And then of course we have using KPIs.

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So this is very CFO level mindset.

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This is not something a lot of people really think about, but it's your

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profit per service, your cost per, client acquisition, and that's where

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you really start to dive into your direct costs, your indirect costs, and

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understanding kind of what goes into all of the cost of service so that you can

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make your business a little bit better.

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And then, of course, looking at where to invest.

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Not just where to cut.

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So if you're cutting something for a reason, maybe you're

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looking to invest elsewhere.

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Like just as an example, again, if you're looking to cut bookkeeping,

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maybe you're, it's because you're looking to invest in funnel building.

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Or if you're cutting funnel building or social media, maybe it's because

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you're looking to invest in bookkeeping so that you can raise your profits

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or just something like that.

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So I wanna give you just a clear list of profitable business moves

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that will help you when you're in this mindset of cutting things.

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So the first thing is investing in client retention.

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So the clients you have, the current clients you have, or the clients

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that you've worked with in the past already know you and trust

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you, and you've built that trust.

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So investing in something that's going to retain them and help them just be.

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Consistent clients is always going to be the best thing for you.

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Whether that is building a retainer, whether that is building out your

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client journey and your back, like the background of your business.

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Building recurring revenue.

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That's always something that's good, especially when you have that monthly

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recurring revenue 'cause that's gonna help you build your business.

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And then of course, getting financial strategy support because.

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If you're someone who doesn't think in the mindset of numbers, like

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KPIs, what's actually profitable, all those things, it's really hard to

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understand where you need to go next because you can be making these six

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figure incomes and not even understand what's going on in your business.

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So that's where we come in with that intentionality.

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And then of course, raising prices intentionally, not reactively.

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So if you have had the experience for six or seven years now, and your

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prices are on the low end, but you know, for your experience, your prices

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should be up here looking at that and saying, okay, like how do I raise my

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prices so I can cover my bottom line?

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Things like that because cutting is not, again, cutting is not always the solution.

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There's just a multitude of other things that it could be that could

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help you not cut and help you grow your business with even more intention.

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Just as a kind of reframe, I want to analyze and give you some steps

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of what to do when you get the urge to cut everything, because honestly,

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it does happen more often than not.

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There's days where you're like, I just wanna burn everything down.

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I don't wanna deal with this anymore.

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So these are the four steps that I want you to take.

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If you're ever in that head space where you're like, I just wanna cut everything.

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I can't afford this, I don't wanna do this anymore.

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So first of all, stop.

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Pause the panic and sit with it for, you know, 25 hours or 25, 24 hours.

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There's only 24 hours in a day.

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Sit with it for a full day.

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Don't cut immediately.

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Like, you know what I mean?

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Don't get the urge to cut and then just be like, oh, I'm gonna cut things.

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Pause it, sit with it for 24 hours, sit with it for 48 hours, however long you

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need to like run through those emotions.

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And this is emotional intelligence we're talking about because a lot of times.

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Finances are tied to emotion, and that brings in that emotional intelligence

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because as business owners, when we just go off of our emotions,

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it can lead to a lot of different things happening in our business

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that aren't necessarily favorable.

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The second thing I want you to do is look at your cashflow forecast.

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And if you don't have fun, that's something you definitely need

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to start looking at and not just like a basic cash flow forecast.

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When we do cashflow forecasts, we look at analyzing what could happen

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if you grow, what could happen with things there, and things like that.

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So looking at your cashflow forecast, seeing where your income is coming.

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Do you have income coming in?

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Do you have things going out?

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Just analyzing everything in your cash flow forecast.

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Identify your high ROI expenses.

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So looking at your expenses and saying, okay, so what is.

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Giving me a high return on investment.

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So again, as an example, if your bookkeeper is giving you a high

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return on investment, they're saving you time, they're saving you

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money, they give you clear insights on what to do with your business.

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It's a high ROI expense, right?

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Because you understand it.

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So if I don't know, as an example, let's just say.

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Canva.

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I know Canva's usually has a high ROI, but let's just say Canva.

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You're using Canva and you feel like it's giving you just the crappiest ROI,

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because you're not, you're never using it.

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You don't use the templates.

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Why would you even bother with it?

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That's a low ROI expense.

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The fourth thing is considering temporary slowdowns with strategy, not gut-based

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slashing, because again, when you go with your gut and you're just like, I'm

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just gonna cut everything, usually you cut things that are helping you build

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your business and not helping you.

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, Usually you cut things that are helping you build your business, not

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things that are not helping you build.

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So sometimes the power move for your business is holding the line

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where you are and not yanking the plug out when we really want to.

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I understand type months are a part of the cycle, but realistically how you respond

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to them and how you react to them really defines how you get to your next level.

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Again, I wanna be clear that.

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If you are in desperate financial situations, cutting

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is a hundred percent an option.

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But if you are someone who is wanting to grow your business with intention,

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you do have room in your bottom line, and there's just ways that

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you're looking to grow your business.

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Cutting is always not always the way.

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You don't need to go lean.

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You just need to become financially literate and understand what's

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going on with your business.

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If that's you and you're like, okay, Samantha, I just really need

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some help with that, I'm available.

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I provide that cash flow support.

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I provide strategy calls.

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It's not necessary, but I'm always there to help you with that, if that's

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something that you're looking at or something that you're going through.

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Even if you just wanna talk.

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I never charge for just talking.

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So if you guys wanna email me, hit me up on Instagram, wherever it is, and just

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talk through something, I'm there for you.

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Okay.

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If you enjoyed this video, make sure to share it with a friend who might think

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that cutting is always the best solution.

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And as always, if you have any suggestions for future episodes,

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leave a suggestion in the using the form in the description box below.

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Always remember to rate the episode and share as it helps people find

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the podcast wherever they may be.

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I appreciate you so much for spending time with me today.

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As always, we'll see you next week.

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Farewell fellow Traveler.